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Demonetization To Stymie MSME Growth: Assocham

Agriculture, cement, fertiliser, automobile, textiles and retail would have "negative impact" whereas power, oil and gas, pharmaceuticals, IT and electronics and infrastructure could see positive reaction.

Demonetization has had an adverse impact on job creation in the economy as the micro, small and medium enterprises (MSME) sector bore the brunt of the reduced cash in circulation, a survey conducted by Assocham has said.

However, the organized sectors and big companies would benefit in the long run. The Assocham Bizcon survey said, “Demonetization of high value currency notes would leave quite a negative impact on SMEs, rural consumption and job creation in the immediate run."

Referring to the sector-wise impact of demonetization, the survey report said agriculture, cement, fertiliser, automobile, textiles and retail would have "negative impact" whereas power, oil and gas, pharmaceuticals, IT and electronics and infrastructure could see positive reaction.

A majority of the respondents stated that the SMEs have been hit and would still suffer the lingering effect for one more quarter. "At a holistic level, a large number of the respondents felt that the impact could be seen in sales volume declining in the last quarter of the current financial year," it added.

While 81.5% of the respondents felt the SMEs have been hit and would still suffer the lingering effect for one more quarter, an equal number said for large enterprises, the unprecedented measure of note ban the impact would be positive.

However, at a holistic level, a large number of respondents felt that the impact could be seen in sales volume declining in the last quarter of the current financial year. The order book position would also follow the same pattern with investment graph not showing much of an uptick for the January-March quarter, retaining almost similar stance as in the previous quarter.

Even as easing of prices in vegetables and some other crops is also attributed to incidents of distress sale in the backdrop of cash scarcity, the Bizcon Survey found that 92% of the respondents said the demonetization would have a positive impact on inflation.

"When the economy is in a state of flux, it is quite a challenge to get the real picture on the ground. Even though our survey does point towards some level of stress, the jury is still out and it would be quite a while before one can say with complete certainty whether or not the currency jerk was good or bad for the economy. For the present, the impact is seen on certain sectors, while others escaped. Hopefully, things would get normalised sooner than later with the Budget being seen as a big trigger," said Assocham Secretary General D S Rawat.